What is a key advantage of issuing equity over debt for a company?

A significant advantage of issuing equity is that there are no required payments on equity, meaning that companies do not have an obligation to make periodic payments to shareholders in the way they would to bondholders or lenders. This flexibility can be especially valuable for companies that may be experiencing cash flow fluctuations or uncertainty in their revenue generation. By avoiding fixed payment obligations associated with debt, companies can reinvest their earnings back into the business or retain more capital on hand for operational needs, development, or strategic initiatives without the pressure of meeting debt repayment schedules.

In contrast, opting for debt involves regular interest and principal payments, which can strain a company's cash flow, particularly during tough economic times. While equity does dilute ownership, it provides a safety net in periods of financial instability by eliminating mandatory payment requirements, ultimately allowing for potentially stronger long-term financial health.